Balancer unveils $8M reimbursement plan for LPs after the $128M V2 exploit

• Balancer will return $8M to affected liquidity providers after the V2 exploit.
• Whitehat and internal teams recovered part of the stolen $28M.
• Reimbursements will be distributed pro rata in the same tokens via a 180-day claim.

Decentralised finance protocol Balancer has unveiled a plan to reimburse liquidity providers (LPs) following the massive exploit that drained over $128 million from its V2 pools.

The reimbursement plan comes after an extensive recovery effort led by whitehat hackers and internal teams, aiming to restore funds and rebuild trust within the platform’s user community.

The plan has been submitted to the Balancer DAO for community feedback and will require approval through a formal voting process before distribution begins.

The Balancer exploit

The Balancer exploit, which occurred in early November, targeted a rounding function flaw in Balancer’s Composable Stable Pools (CSPv5).

Attackers combined this vulnerability with batched swaps, allowing them to manipulate token price calculations and drain multiple pools across Ethereum, Polygon, Base, and Arbitrum.

Despite 11 previous security audits conducted by four different blockchain security firms, the vulnerability went unnoticed.

The breach sent shockwaves through the DeFi sector, causing Balancer’s total value locked to fall from $775 million to $258 million, while its native BAL token lost roughly 30% of its value.

Portions of the protocol were paused immediately after the attack to prevent further losses, while whitehat and internal recovery operations began working to salvage funds.

Recovery efforts and whitehat contributions

Overall, approximately $28 million of the stolen funds was recovered.

Whitehat hackers played a significant role, reclaiming around $3.9 million, while internal Balancer teams, including coordination with security firm Certora, retrieved another $4.1 million from vulnerable metastable pools that had not yet been exploited.

Among the whitehat contributors, an anonymous actor dubbed “Anon #1” recovered $2.68 million on Polygon, including various tokens such as WPOL, MaticX, TruMATIC, and stMatic, as detailed in the unveiled reimbursement proposal.

Some rescuers on Arbitrum declined to identify themselves and waived their bounty claims, highlighting the voluntary and community-driven nature of these recovery efforts.

The remaining $19.7 million in osETH and osGNO tokens was recovered through StakeWise, an Ethereum liquid staking protocol, and will be returned to users via StakeWise’s own governance mechanisms.

The $8M reimbursement plan

Balancer’s reimbursement plan focuses on the $8 million recovered directly by whitehats and internal teams.

The framework adopts a non-socialised approach, meaning funds are returned only to liquidity providers in the specific pools affected.

Reimbursements will be distributed on a pro-rata basis according to each user’s Balancer Pool Token holdings at a snapshot block taken before the exploit.

Payments will be made in-kind, allowing users to receive the exact tokens that were stolen, avoiding any mismatches or unintended losses due to price fluctuations.

Whitehat contributors are entitled to a 10% bounty of the recovered funds, capped at $1 million per operation.

To receive their reward, Whitehat participants must complete identity verification, KYC, and sanctions screening under Balancer’s SEAL Safe Harbour Agreement.

Notably, internal recovery operations, including Certora’s involvement, are excluded from these bounties due to pre-existing service agreements.

If the distribution plan is approved, affected liquidity providers will have a 180-day window to claim their funds, during which they must digitally accept Balancer’s updated terms of use.

These terms require users to release Balancer Labs, the DAO, the Foundation, and affiliated parties from legal liabilities related to the exploit.

Unclaimed funds after 180 days will be considered dormant and may only be reallocated through a governance vote.

The post Balancer unveils $8M reimbursement plan for LPs after the $128M V2 exploit appeared first on CoinJournal.